Do You Know Your Credit Score? And Why It Matters?
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Do You Know Your Credit Score? And Why It Matters?

Whether you realize it or not, you are creating a financial history that will help shape your future. Every time you do—or don’t—make a loan payment, use a credit card, or even apply for a credit card, you’re contributing to your financial history in the form of a credit score. While you may not think about it often, your score can have a huge impact on what you are and aren’t able to do with your life. From securing a car loan or a mortgage to turning on the utilities in your new place and getting a cell phone, your credit score matters. 


You are entitled to a free credit report every 12 months from each of the three major consumer reporting companies (e.g. Experian, Equifax, and TransUnion). Once you’ve received your annual free credit report, you can still request additional reports. By law, a credit reporting company can charge no more than $14.50 for a credit report. You can also check your reports for free weekly through Annual Credit Report (, which also provide reports in languages other than English. Because checking your credit report is not an inquiry about new credit, doing so has no effect on your score.


At its core, your credit score is a numerical representation of your creditworthiness, or how likely you are to repay borrowed money on time. With a range of 300 to 850, your credit score is determined by several factors, including:

– Payment history (35%) - Whether you pay your bills on time

– Amount owed (30%) - How much debt you have in comparison to existing credit limits

– Length of credit history (15%)  - How long you've had credit accounts

– Types of credit used (10%) - The mix of credit cards, loans, etc. you have

– New credit applications (10%) - How often you apply for new credit

The higher your score, the more likely you are to be approved for whatever it is you’re applying for and the better the terms you'll receive.

Even if you you’re not planning to apply for a loan, credit card, or do anything else that requires a credit check, it’s a good idea to regularly review your report (see box for information on how to do that). This can help ensure that the information the credit reporting companies share with lenders is accurate and up to date and really represents who you are as a potential credit risk.

When you receive your report, look over the personally identifiable information, such as names, addresses, Social Security Number, open accounts, and loans to make sure everything is correct.

Then review the other information for accuracy and completeness. If you spot something—say a credit card you don’t recognize, an account that you thought you had closed, or the incorrect date for a last payment—contact the credit reporting company that issued the report. You will likely need to explain in writing what you think is wrong, why, and include copies of documents that support your dispute. You’ll also need to contact the party that provided the erroneous information to the credit reporting company (i.e. your bank, landlord, credit card company, etc.). Once they’ve corrected your information, they are responsible for notifying all the credit reporting companies about the correction. 

While you may not think about your credit score every day, it’s always out there and being shaped by your financial choices. Staying on top of your score and making an effort to keep it high can lead to stronger financial wellbeing and put you on the path to achieving your financial goals.



DISCLAIMER: This article is meant for educational purposes only and is not intended to be construed as financial, tax, investment or legal advice. 


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